WEN - NO SALE
Trian advised the board that they could not sell the Company and now believe "that in light of the company's current business momentum and strong liquidity position, returning additional capital to shareholders through additional stock repurchases and increased cash dividends was the appropriate path to enhance shareholder value at this time." The momentum of the company will be slowing into FY2023, MCD remains a force, and QSR is spending $400 million to revamp the BK brand!
WEN said (A)EBITDA $123.5M vs. FactSet's $121.6M global SSSs growth of +6.4% vs. FS of 4.8% and US SSS sales growth of +5.9%, and the Company announced today a 100% increase in its regular quarterly cash dividend to $0.25. This increase will be effective beginning with the Company's first quarter dividend, payable on March 15, 2023, to stockholders of record as of March 1, 2023. The BOD has approved a new $500 million share repurchase authorization, expiring in February 2027, replacing the previously approved $250 million share repurchase authorization, which was set to expire in February 2023, has been canceled. The Company also announced an organizational redesign designed to redesign its organizational structure. The redesign will be made to better support the execution of the Company's long-term growth strategy by maximizing organizational efficiency and streamlining decision-making. As a result of the redesign (layoffs??), the Company anticipates its 2023 and 2024 G&A will be relatively flat versus 2022, despite elevated inflationary pressures. "The Company remains committed to driving accelerated growth across its three strategic pillars of building its breakfast daypart, accelerating its digital business, and growing its global footprint." The first cost-cutting move is announcing that the Company determined that the role of President, U.S., and Chief Commercial Officer was being eliminated. As a result, Kurt A. Kane will depart the organization. Also, Leigh A. Burnside, the Company's SVP, Chief Accounting Officer, and CFO U.S., notified the Company of her intention to resign to become the CFO at another restaurant company. Suzanne M. Thuerk, Vice President - Accounting, has been appointed as the Company's Chief Accounting Officer, effective January 20, 2023. Burnside will remain with the Company through this date to support the transition to Thuerk.
FOOD INFLATION
Consumer prices rose 6.5% in December compared to last year to cool off from the 7.1% pace in November. Core CPI was up 5.7% year-over-year and 0.3% higher on a month-to-month view to match estimates. Overall, food prices were up 10.4% in December from a year ago and tracked 0.3% higher from November. Some of the food categories that are still showing elevated levels of inflation include breakfast cereal (+13.0% Y/Y), flour (+23.4%), poultry (+12.2%), lettuce (+24.9%), bakery products (+16.3%), and coffee (+14.3%). Meat prices moderated quite a bit and were only up 2.0% year-over-year. Meanwhile, the price of eggs in the category showed a 59.9% year-over-year rise for December and was 11.1% higher month-over-month. Cal-Maine (CALM) is among the biggest beneficiaries of higher egg prices. The stock gained more than 30% last year after inflation, strong demand, and an avian flu outbreak contributed to higher prices. Of note, over 60M birds have died from highly pathogenic avian influenza, making it the worst outbreak in U.S. history, per data from the Department of Agriculture.
SUBWAY
According to the Wall Street Journal, Subway has retained lawyers and advisers to explore a sale of the Company. The outlet noted that the sale talks remain "in the early stages," but a valuation of more than $10B is currently being floated. Both private equity and competing restaurant corporations are expected to bid, per the Journal. The sticker price for the deal would be one of the largest in recent memory for the restaurant business, nearing Burger King/Restaurant Brands (NYSE: QSR) $11.4B deal for Tim Horton's and Inspire Brands' $11.3B acquisition of Dunkin Brands. Restaurant Brands (QSR) previously held informal talks to purchase the sandwich chain in 2021. According to consulting firm Technomic, Subway's annual sales have declined relatively for years, falling to $9.4B in 2021, about half its 2012 peak. The chain has also worked diligently to trim its hulking store count, which is still second only to McDonald's Corporation (MCD) globally.
